New products, new industries, and more jobs require continuous additions to knowledge of the laws of nature, and the application of that knowledge to practical purposes. Similarly, our defense against aggression demands new knowledge so that we can develop new and improved weapons. This essential, new knowledge can be obtained only through basic scientific research. -- Science The Endless Frontier, a report to the President by Vannevar Bush, Director of the Office of Scientific Research and Development (precursor to the National Science Foundation), July 1945
Bush's words ring just as true today as they did when he penned them back in 1945. But the reverse is also true: Not only does scientific research help create "new industries" and secure our "defense against aggression," but the desire for economic and military progress also drives scientific research.
In fact, another noted scientist -- 17th-century Dutch mathematician and physicist Christiann Huygens -- argued as much when he wrote that the need to "provide for our own necessary defence against our enemies" is God's way of spurring mankind toward "sharpening our inventions." A society enjoying "continual peace," argued Huygens, with "no fear of poverty, no danger of war," is one likely to suffer economic stagnation and lack of scientific progress.
Fast-forward to today, and Hayden Planetarium director Dr. Neil deGrasse Tyson makes a similar argument in his newest book discussing "the unspoken alliance between astrophysics and the military," Accessory to War -- that very often, military advances go hand in hand with scientific advancements.
Accessory to science
Earlier this month, I had the opportunity to discuss this new book with Dr. Tyson, as well as his thesis that "the advocates of war, and the seekers of profit" have historically been allies to "the practitioners of science" -- who through their discoveries make both their military and economic advances possible.
As it turns out, Tyson only agrees with Bush and Huygens "about 80%," qualifying that "enlightened nations" -- the United States, for example -- do fund pure scientific research for its own sake, as the existence of the National Science Foundation and its $7.5 billion budget attest. That being said, Tyson concedes that his predecessors in science have a point: "Major leaps in science are driven by military and economic motivations, because these bring with them major increases in science funding."
Waxing poetic, Tyson goes on to state a couple of truisms: "No one wants to die -- and no one wants to die poor." By making it easier to defend against aggression, and also promoting economic advances, scientific research helps to prevent us from dying -- and also from dying poor.
Science for war's sake
An astrophysicist by profession, Tyson cites the prototypical example of science serving as an accessory to the military -- the space race.
America didn't develop the ability to put satellites into orbit, or send astronauts to the Moon, out of pure scientific curiosity. It did so first out of fear that the Soviet Union had put something -- as it turned out, a blind and unarmed satellite called Sputnik -- into orbit, and then in order to beat the Soviets to the Moon. Without this U.S.-U.S.S.R. rivalry, it's unlikely America would ever have invested billions of taxpayer dollars into a space program with no immediately obvious economic benefit.
And yet, this military rivalry with the Soviet Union did advance the cause of science. It did put the U.S. in space -- and in the process, it jump-started the creation of our present $350 billion global space economy.
As a counterpoint, Tyson offers the example of the "Superconducting Super Collider" that the Reagan administration inaugurated in the 1980s. President Reagan could have funded this project as an exercise in scientific "arcane interest" without "practical applications" (as he demurred at the time). But his real motivation for investing $777.5 billion worth of taxpayer dollars (in 2018 dollars) in order to build the world's largest particle accelerator was to give the U.S. "an edge" over the Soviet Union in the field of high-energy physics -- useful in both weapons and energy research.
Three years after work had begun on the SSC, though, the Soviet Union collapsed. Two years after that, with the Soviet threat vanished, Congress "zeroed the budget," Tyson points out.
What it means for investors
The conclusion is clear: Where there's a military need for scientific research (or a clear opportunity for profit), the government will find the money to fund it. But absent a military or economic motivation, it's a lot harder to get the government to ante up.
And that brings us to the real point of this column: What is the future for investors in the space industry today? Seeking opportunities for investment, should we be looking for companies vying to build President Trump's military "Space Force" for example, or are there opportunities to profit from space that we should be examining?
Addressing the easiest question first, Tyson emphasizes a point made in his book: that any war fought in Low Earth Orbit (LEO) is unlikely to produce a winner -- but a whole lot of losers. Citing the example of China's Fengyun 1C satellite, which that country destroyed with an anti-satellite missile in 2007, Tyson notes how that single incident created a huge debris field in Earth's orbit -- one that has threatened the International Space Station with collision damage several times in the past few years. (It appears to have had another close call just this week.)
Every incremental piece of debris added to orbit heightens the risk of starting a Kessler effect phenomenon of cascading collisions causing ever more collisions -- until all of LEO is uninhabitable. A space war that sees just one or two satellites blown to smithereens thus has the potential to destroy everyone's satellites in orbit -- victor's and vanquished alike -- and to prevent the safe launching of new satellites to boot. For that reason if no other, Tyson believes that holding a war in space is a very bad idea.
As for less martial investment possibilities, when I raised this question with Tyson last year, he cautioned that "a profitable space industry may be farther away than people think. Space is expensive and it is dangerous," he said, and profits are not guaranteed.
That being said, he did suggest a couple of areas to keep an eye on. One area that we've talked a lot about here at the Fool is asteroid mining. As Tyson explains, already today, it's possible to use radar and lasers from Earth to confirm that many asteroids in solar orbit are made up largely of solid chunks of metal -- not just iron, but gold and other precious metals that could be useful for building things off-planet. Comets contain water -- valuable not just for drinking, but as elemental hydrogen and oxygen that can be burned as fuel.
Once we've sent probes to these asteroids to confirm the precise composition of likely prospects (does an asteroid known to contain gold comprise 100% gold, or just 10%, or 1%?), it will be possible to quantify the risks and returns of mining it -- a necessary precedent to companies investing the sums needed to begin mining operations, and for insurers to insure such ventures. In Tyson's view, the biggest opportunity for business in space will be the extraction of such resources, and their movement from place to place off-Earth.
That's not the only opportunity, though. Tyson believes the most immediate investing prospect in space will most likely be space tourism.
Tyson hypothesizes that the demand for space tourism will be "elastic," such that although there's a limited market for trips to the International Space Station at $100 million a pop (a price recently mooted by Roscosmos), the lower prices fall, the greater demand will rise. Already, two companies are expected to begin offering suborbital rides to the edge of space for under $1 million (Virgin Galactic and Blue Origin) within the next year or so. Once those services start up, price competition is likely to ignite the dynamic of improving service and improving prices that's so often resulted in greater demand for products and services historically.
Whatever the motivation that ultimately gets us there, America seems on a clear trajectory to return to space. What can investors expect when we get there?
In perhaps his most enlightening observation of our entire talk, Tyson pulled out an example from the 1920s. That was when physicists first got serious about trying to probe the mysteries of the atom, says Tyson -- and not because they wanted to build an atom bomb. As it turned out, they conducted this research out of pure scientific curiosity. That effort ultimately led to a greater understanding of how physics works at the molecular and atomic levels -- quantum physics, in other words -- without which we'd never have learned how to transition from transistors to semiconductors.
One hundred years later, Tyson observes that some 20% of global GDP is now tied to a digital economy built upon semiconductors. Without the advances pioneered by science a century ago, we'd all be one-fifth poorer today. Could America's return to space drive similar economic gains?
We won't know until we get there.